The textile industry of India is known for its craftsmanship and different designs all around the globe. Starting as early as the Indus Valley Civilization India’s textiles are famous for their fine quality and craftsmanship.
In modern-day, India is famous to the finely created textiles in high demand all over exciting world of. Despite such high demand, the textile industry in India was unable fulfill 100% demand of Indian textiles both organic and man made.
The textile industry in India has witnessed several alterations in taxation under the new GST regime. The implication of GST will affect the marketplace and its increase future. The textile production process that includes synthetic & artificial fibers and naturally created fibers.
The GST regime offers many advantages to the industry players in the domestic market that focus on strengthening the domestic market creating new opportunities for new businesses in the textile industry. The associated with GST in the textile sector will encourage more organized structure in implementation in the textile industry.
The GST brings forth transparent and straightforward taxation process of which may be fast paced and saves time from filing taxation at multiple levels for goods and services offered by the textile industry. The textile industry has raised concerns for some time while.
These are the concerns for duty disparity that is preventing the domestic textile producers from expanding their operations and scaling up their manufacturing for better revenue via exports. This is consequently hurting the nation’s exports in textiles leading to the decline of revenue.
Cotton based textiles are an important part of the nation’s economy and duty relaxation plays a huge role in business expansion in different parts of the country. The cotton fibers and textiles witness more effort and time consumption compared towards production of the synthetic and artificial fibers.
Hence, it may happen the government will introduce special taxation relief and incentives for the cotton textile industry. Affected consumption of textiles made from synthetic and artificial fibers at the global scale are 70%.
With duties and taxation streamlined and simplified. This makes it easy for first time and existing businesses pay for and sell synthetic and artificial textiles.
In take a look at ICRA, a lesser rate of 12% is mandatory by the Dr. Arvind Subramanian Committee is likely to have a damaging impact while on the textile category. In this case, especially the cotton value chain, that is at present attracting a zero central excise duty (under optional route).
Unlike the synthetic fiber sector, if the fiber attracts excise duty at the production stage (unlike cotton). Hence, there a good incentive for that downstream players in the synthetic sector to avail the Input Credit Tax (ITC).
The textile industry is broadly split into nine categories when we talk with regard to the taxation policy. The current taxes vary from 4% to 12% based on these sorts.
Further, unorganized players of which are given tax exemptions according to the sized their operations dominate the textile sector.
There are unique taxation policies for cotton and man-made fibers: Zero duty for cotton fibers as the actual high excise duty structure of nearly 12.5% on man-made materials.
With the implementation from the GST, there will be uniform taxation policies this also cause an obstruction as the input taxes will be eliminated since GST is a consumption taxes. Zero rating on exports under GST will increase exports further without the various subsidy schemes.
Goods movement within the states are going to much easier as many local state taxes which can be levied on the borders of states will evade and free movement of goods will get allowed. The cotton and synthetic fiber are also subject to 4%-5% state VAT, which is evaded by the GST.
However, when the duty treatment of all cotton and synthetic fibers remains to be the same, prices of textile items made from cotton fiber could rise a tad.
Nevertheless, the equal tax treatment policy will give a rise to man-made fiber production this exports too. The industry has since a hard time, been complaining how the duty disparity is barring domestic producers from scaling up operations and, eventually ending up hurting India’s export competitiveness in artificial and synthetic textiles.
This is really because while artificial and synthetic fibers cause around 70% of the total fiber consumption, they manufacture up for less than 30% of India’s insist on good.
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